The Fiduciary Relationship Flashcards
What are the two key fiduciary duties?
No conflict: cannot put their personal interests in conflict with the principal
No profit: Cannot obtain an unauthorised benefit as a result of position as fiduciary either for themselves or for a third party
What is self-dealing?
A trustee purchasing assets from the trust or selling assets to the trust
If this happens - transaction will be voidable
Is it self-dealing if a trustee buys / sells to a company in which they own shares but are not the sole shareholder?
Depends on whether trustee has the controlling stake
What is fair dealing?
When the trustee directly transacts with the beneficiary to buy their beneficial interest under the trust
What must trustee show in an incidence of fair dealing?
Trustee must be able to demonstrate that the transaction was conducted fairly
If not - voidable unless T can show that they disclosed, acted honestly and fairly and did not take advantage of the beneficiary
When can fiduciaries proceed with a potential conflict?
If the transaction is authorised by the trust instrument
Or the fully informed consent of principals has been obtained
What are the consequences of a breach of fiduciary duty?
Breach causes loss - sue fiduciary personally
Self - dealing / fair - dealing rule - transaction is voidable - B may seek rescission
Breach results in a profit to the principal + fiduciary - can recover profit from fiduciary. May wish to end relationship
Fiduciaries cannot put themselves in a position where they might be tempted to act in their own interests. Give examples of breaching that rule
Using principal’s property to make a profit
Indirectly profiting from their role as a fiduciary - e.g. accepting remuneration for a directorship which was appointed because of role of trustee
Exploiting an opportunity which comes to them as a result of their fiduciary position
Receiving a bribe / secret commission to influence way in which they perform their role as fiduciary
What is the remedy for breach of the no-profit rule?
An account of profits - an amount equivalent to the profit made
Constructive trust - proprietary claim
- This protects against insolvency and allows principal to trace into any assets acquired with the profit
